KARACHI, Dec 24: The Metropolitan Life Assurance Company of Pakistan Limited — the smallest of the four life insurance companies in the private sector — is to be the first in the sector to declare a dividend for the shareholders.

There have been no dividend payments so far from the other three: EFU Life; American Life (ALICO) and the Commercial Union.

The Board of Directors of the Metropolitan had resolved early last month to disburse cash dividend at 5 per cent to the minority shareholders, subject to the approval of the SECP.

The Regulator, subsequently, gave its consent for payment of dividend to the minority shareholders “out of interest free loan by the sponsor directors”. The SECP also put the caveat: “Sponsor directors shall not withdraw the said loan unless there is a profit and with the prior approval of the Insurance Division”.

The Metropolitan’s decision to disburse a dividend at 5 per cent to the minority shareholders has not been based on the company’s profitability but the listing regulations of the Karachi Stock Exchange that stipulates that non-payment of dividend by a publicly traded company for five years in succession, would render it liable to be relegated to the ‘defaulters’ counter.’ “This could present a negative image of the company to the shareholders”, said Maheen Yunus CEO and MD Metropolitan. Evidently, the Regulators did not agree with the company’s contention that life insurance companies had a longer gestation period. All four companies had begun business in the last 4-7 years.

Market price of the 10-rupee share in Metropolitan carries nearly 80 per cent discount; the company holds share capital of Rs60 million. Paid-up capital of EFU life is Rs150 million; the company having offered right issues at 60 per cent in 2001. The two life insurance companies with foreign majority stake: CU has capital of Rs300 million and ALICO, the largest capital base of Rs325 million.

In the last released financial statements for the half year to June 30, 2001, EFU posted after tax profit of Rs4.49 million and ALICO taxed profit of Rs20.50 million. Metropolitan turned in loss of Rs2.09 million. CU Life posted net loss of a huge Rs32 million for the half term, which went to widen its accumulated deficit to Rs250 million.

From the look of their balance sheets, a consistent stream of profitability and dividends for shareholders in the private sector life insurance companies, may still be a distant dream. “The life insurance business is still dominated by the public sector giant — State Life Insurance Company Limited (SLIC) — which commands nearly 85 per cent of the market share”, analysts at brokerage Khadim Ali Shah Bukhari & Company, say.